We wanted to understand what was going on with GDP on a U.S. state by state basis ever since Covid started and where we are today. We believe in the Pareto Principle and we only want to research the top 80% of states that produce the most GDP. We’re not state snobs we just don’t have the time to focus on all 50 U.S. States so we have to cut the line somewhere and it is always an amazing data point that 80% of the GDP comes from a small number of states. In our case, we are looking at the top 21 states that account for roughly 80% of GDP.
If you look through the table, you will note that most states have continuity of growth in GDP except of course when covid hit hard in Q2 of 2020 but most states have begun recovery. The states highlighted yellow account for $102 billion in GDP which is about 80% of the $128 billion total of all states. The top three states, California, Texas and New York account for a whopping ~$40 billion in GDP. When we do our investment research we want to ensure that the companies we invest in have a piece of these numbers. We like companies based in these states or who have large customers based in these states.
The table below has 5 full years of GDP data and we can see the trends and where the money is being made and where we should focus our research.
Let’s take a look at population matrix. The first four states, California, Texas, Florida and New York match GDP to Population perfectly. The other states match closely but clearly some states managed business growth better than others despite population.
So what do we do with this data?
We want to invest in companies that understand the current environment and have plans for the future. Keep in mind that in 2030 there will be 70 million baby boomers hitting retirement age of 65 or older. We think most people will opt to retire rather than continue working. We are analyzing which states will be hard hit when 2030 arrives but there are already some obvious implications.
- We know that older people tend to want to retire from colder climates to warmer climates for a variety of reasons.
- Northern states will likely see a decline in population and southern states will see a rise in population.
- We expect New York, Illinois, Pennsylvania, Ohio, New Jersey, and other northern states will have issues attracting workers and depleting populations – which companies, businesses and profits will be impacted?
We will dive into these issues in a future post. Stay tuned.
